The NDP is calling on the federal government to claw back pandemic wage subsidies handed to companies that took advantage of the cash to boost executive compensation. THE CANADIAN PRESS/Justin Tang

The NDP is calling on the federal government to claw back pandemic wage subsidies handed to companies that took advantage of the cash to boost executive compensation. THE CANADIAN PRESS/Justin Tang

NDP demands federal wage-subsidy clawbacks, but critics question feasibility

Last month’s federal budget extended the wage subsidy through September

The NDP is calling on the federal government to claw back pandemic wage subsidies handed to companies that took advantage of the cash to boost executive compensation, but economists say other paths to worker support may mark a more feasible route.

In a May 13 letter to Finance Minister Chrystia Freeland, New Democrat Peter Julian said all publicly traded companies that received the Canada Emergency Wage Subsidy (CEWS) should repay any bumps in salaries and bonuses for senior management.

“The wage subsidy was clearly supposed to go to workers and toward protecting Canadians’ jobs — not bonuses for top corporate brass,” the letter states.

“In a case where there’s a clear violation of what the clearly stated goals of the program were, it is absolutely appropriate to ask for that money back,” Julian said in an interview.

Though Freeland has repeatedly said the subsidy can only be used to pay employees, nowhere does it bar beefier executive compensation as a condition of that support.

Julian also criticized Ottawa for failing to add caveats restricting share buybacks and higher dividends.

Last year, hundreds of chief executives and senior managers enjoyed millions in dividends paid out by publicly listed firms that also gobbled up hundreds of millions from the CEWS program, which provides a subsidy of up to 75 per cent for payroll expenses and is estimated to cost $110.6 billion.

The NDP finance critic slammed the government for its “aggressive” moves to crack down on abuse of the Canada Emergency Response Benefit, intended to help Canadians who lost work during the COVID-19 pandemic.

“They’ve been putting pressure on people who received CERB, even when they were the victims of fraudulent behaviour by other people. But they have not stepped up and given any indication at all on the wage subsidy. And that’s simply wrong,” he said.

Freeland’s spokeswoman, Katherine Cuplinskas, stressed that the program aims to protect jobs, saying it has helped more than 5.3 million workers stay on payroll or get rehired.

CEWS, which she noted received unanimous approval in the House last July, “applies to businesses of all sizes and across all sectors to ensure that no worker falls through the cracks,” she said in an email.

Smaller retailers and the entertainment, tourism and aviation sectors reeled amid lockdowns over the past 14 months, but big-box stores, tech companies and transport firms fared well as remote work and online delivery ramped up.

Many countries introduced bans on dividend payments and other rewards within months of the first wave. Spain demanded full reimbursement of job-retention funding for companies that paid any dividends. The Netherlands imposed a ban on dividend payments, share buybacks and bonuses for executives at companies that took advantage of wage relief in the same year.

Last month’s federal budget extended the wage subsidy through September, but with a new clawback system for jacked-up executive compensation at publicly traded companies — a step the NDP now wants applied retroactively.

David Macdonald, a senior economist at the Canadian Centre for Policy Alternatives, says a tax rule effectively forcing reimbursement from companies that declared profits while receiving the subsidy might offer a simpler, if blunter, solution.

“The federal government can certainly change the tax rules. And they can do it retroactively if they want to,” he said.

Ottawa could also tighten the new clawback measures by including dividend boosts and share buybacks among the repay items. “There’s $25 billion that’s going to be paid out in this fiscal year, starting April 1. So there’s still time, the program’s not over.”

University of Toronto economist Michael Smart says a future program overhaul makes more sense than retroactive clawbacks, and suggests the federal government limit the subsidy to small businesses and battered sectors or apply it only to at-risk jobs.

“Any company that issues stock on the Toronto Stock Exchange does not need the government to step in,” he said. “We’ve got to get back to a focus on workers and Canadians who are experiencing income losses.”

Smart called it a “mistake” to zero in on clawbacks, highlighting potential loopholes.

“If the government were to pass a rule that CEWS gets clawed back from any company that increases dividends this year, then as the CFO of a company I would know exactly what to do: Don’t pay out a special dividend this year; pay out a special dividend next year,” he said.

“All it does is it takes the heat off of Ottawa.”

While Canadians may be “surprised or shocked” that emergency funds landed at companies that promptly lined the pockets of their C-suite staff, “that’s a tiny fraction of the overall issue of this program,” he added.

Starting in June, the revised CEWS program will raise the eligibility threshold to 10 per cent revenue loss relative to the same four-week period in 2019. A progressively lower subsidy rate as September approaches is also part of the plan.

“This money should be going to people who actually need it, businesses that actually need it, to try to stay afloat for hopefully what’s just the last few months of the pandemic,” Macdonald said.

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

NDP Leadership

Just Posted

Adrian Moyls is the Selkirk College Class of 2021 valedictorian and graduate of the School of Health and Human Services. Photo: Submitted
Selkirk College valedictorian proves mettle in accomplishment

Adrian Moyls is a graduate of the School of Health and Human Services

There were no injuries in a fire on the KFP deck, and an estimated $3,000 damage. Photo: Submitted
Nelson fire department extinguishes blaze on KFP dock

The fire originated in a tent, but there were no injuries

Starting on June 15 the Nelson Public Library will be open Tuesdays and Thursdays from 10 a.m. to 7 p.m., and Mondays, Wednesdays, Fridays and Saturdays from 10 a.m. to 6 p.m. Photo: Submitted
CHECK THIS OUT: Nelson library returns to regular hours

The library will still require masks and no seating for the time being

The pilot of this single-engine propeller plane was unhurt after crash-landing in a Como Road orchard Friday, June 18. Photo: Laurie Tritschler
Plane crash lands into Grand Forks orchard, pilot injured

RCMP have secured the crash site, pending investigation by Transport Canada

A small pod of Pacific white-sided dolphins pass by close to shore in Campbell River June 16, 2021. Still capture from video courtesy of Kimberly Hart
VIDEO: Dolphin sunset captured from Vancouver Island shore

Spectacular setting for view of travelling pod of Pacific white-sided dolphins

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Police are asking for public assistance in locating Anthony Graham who has been charged with the murders of Kamloops brothers Carlo and Erick Fryer. (RCMP photo)
2 charged, suspect at large in killings of B.C. brothers linked to gang activity: RCMP

Kamloops brothers Erick and Carlo Fryer were found deceased in May on a remote Okanagan road

Albert Health Minister Tyler Shandro and Alberta Premier Jason Kenney unveil an opening sign after speaking about the Open for Summer Plan and next steps in the COVID-19 vaccine rollout, in Edmonton, Friday, June 18, 2021. THE CANADIAN PRESS/Jason Franson
Alberta 1st province in Canada to lift all COVID-19 public health restrictions

70.2% of eligible citizens 12 and older in the province have received a dose of the vaccine

Fraser Health registered nurse Ramn Manan draws a dose of the Pfizer COVID-19 vaccine into a syringe at a walk-up vaccination clinic at Bear Creek Park, in Surrey, B.C., on Monday, May 17, 2021. THE CANADIAN PRESS/Darryl Dyck
‘Honour our fathers’ with COVID-19 vaccine protection, B.C. urges

109 new cases Friday, 75 per cent of 12 and up immunized

(Paul Henderson/ Chilliwack Progress)
Trutch Avenue in Chilliwack to be renamed to remove racist taint

New name to have Indigenous significance as Chilliwack takes new step toward reconciliation

Canadian Prime Minister Justin Trudeau is seen during a joint news conference following the EU-Canada Summit, in Brussels, Belgium, Tuesday June 15, 2021. Trudeau says Canada is on track now to have 68 million doses delivered by the end of July, which is more than enough to fully vaccinate all 33.2 million Canadians over the age of 12. THE CANADIAN PRESS/Adrian Wyld
Vaccine deliveries enough to fully vaccinate all eligible Canadians by end of July

Three in four eligible Canadians now have their first dose, nearly one in five fully vaccinated.

Chief Public Health Officer Theresa Tam listens to a question during a news conference, in Ottawa, Tuesday, Jan. 12, 2021. The number of confirmed COVID-19 cases attributed to the highly contagious Delta variant grew in Canada this week. THE CANADIAN PRESS/Adrian Wyld
Canada’s public health agency reports spike in confirmed cases of Delta variant

More than 2,000 cases of the variant confirmed across all 10 provinces and in one territory

Most Read